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November 2007

BGE January 4, 2008

Overview of Regulatory Environment for Planning Transmission Expansion

David W. Hilt Vice President – Transmission December 2012


Presentation Outline History of Blackouts- a predecessor to regulatory and

reliability corporations in North America

FERC and its role into transmission expansion planning and regulations

NERC and its role into transmission expansion planning and regulations

Transmission Expansion including RTO/ISO and other models in the North America and regulations

Restrictions /Congestion in North America Overview of Transmission congestion in North America

RTO/ISO and Utilities perspective

North America and Colombia comparison RTO/ISO and XM commonalities and differences


North American History

1962 The Interconnected Systems Group (ISG), comprised of utilities

located in the Midwest and South, met to prepare for the imminent closure of seven interconnections to form the largest synchronized system in the world.

The Interconnection Coordination Committee (ICC) was formed to study and recommend an informal operations organization for the future.

The North American Power Systems Interconnection Committee (NAPSIC) was formed that adopted the recommendations of the ICC. NAPSIC developed initial operational guidelines


History - 1965 November 9, 1965

NY Blackout Systems control centers

should be equipped with display and recording equipment which provide the operator at all times with as clear a picture of system conditions as possible

Coordinated programs of automatic load shedding should be established and maintained

Thorough programs and schedules for operator training and retraining should be rigorously administered


History

1967 Initial suggestion for Federal Regulation of Reliability

U.S. Federal Power Commission (predecessor to the Federal Energy Regulatory Commission – FERC) report on the blackout recommended a council on power coordination made up of the nations Regional coordinating organizations.

Electric Power Reliability Act of 1967

1968 Twelve Regional and area organizations form the National Electric

Reliability Council (NERC)


History - 1977

July 13, 1977 New York City The single most important

cause of the July 13, 1977 power failure was the failure of the system operator to take necessary action

Make a thorough reevaluation of the selection and training of system operators.

A full scale simulator should be made available to provide operating personnel with “hands-on” experience in dealing with possible emergency or other system conditions


History 1995

The Federal Energy Regulatory Commission issues its Notice of Proposed Rulemaking (NOPR) on Open Access Created wholesale competition

Bifurcated the industry

NERC Recognized Need for Regulation

Open Access Transmission Working Together vs. Competitors

Blue Ribbon Panel

Recommended Mandatory Standards

Proposed Consensus Legislative Language

Expectation – A Few Years to Pass Legislation

Language Included in Nearly All Proposed Energy Bills

Even a Stand Alone Bill Proposed


History

July 2, 1996 – Western US Blackout Review the need for a security monitor function to

monitor operating conditions on a regional scale and promote interconnected system reliability

Review the need for tools such as on-line power flow and stability programs and real-time data monitors

Review the current processes for assessing the potential for voltage instability and the need to enhance the existing operator training programs, operational tools, and annual technical assessments


History

August 10, 1996 – Western US Blackout Develop and periodically review a reactive margin against

which system performance should be evaluated and used to establish maximum transfer levels.

Coordination among regional members and with neighboring systems should be increased regarding maintenance schedules, underfrequency and undervoltage load shedding plans, transfer levels, and system protection

Develop communications systems and displays that give operators immediate information on changes in the status of major components in neighboring systems

Strongly encourage operators to exercise their authority to take immediate action if they sense the system is starting to degrade

Train operators to make them aware of system conditions and changes.


History – It Repeats Itself

August 14, 2003 – Northeast Blackout

Three Key Areas consistently appear The 3 T’s Tools – For the operator to

monitor and assess a wide area and evaluate actions

Training – Simulators, structured programs and drills to assure actions are taken

Trees – Vegetation management


Reliability Standards History – Pre-ERO

NERC’s Operating Policies and Planning Standards Operating Guides came into existence based on the NAPSIC

guidelines

Planning Standards developed in the 1990’s

All were voluntary – Peer Pressure in a non-competitive world Explain what happened before a group of peers at NERC

No penalties or sanctions

No compliance monitoring or enforcement


Legislation – Result of the 2003 Blackout

Energy Policy Act of 2005 – Title XII Electricity Modernization Act of 2005 (5 ½ Pages) Signed Into Law – August 8, 2005

Established the Federal Energy Regulatory Commission as Responsible for Bulk Power System Reliability

Called for FERC to Establish Rules for an (1) Electric Reliability Organization within 6 months

Set Penalty Authority at $1 Million per Violation per Day

FERC Issued Rules for the Electric Reliability Organization (ERO) – Order 672 (377 Pages) – February 3, 2006 Established Requirements and Rules for the ERO

Anyone Could Apply


Mandatory Reliability Standards – ERO Formed

ERO must have the ability to develop and enforce Reliability Standards that provide for an adequate level of reliability of the Bulk-Power System (FERC Implementing Rule)

Reliability Standards must be approved by FERC in the United States and Canadian Regulators through Rulemaking Process

FERC cannot write the standards But can direct their development or revision

Canadian Provinces differ Some are enforceable upon NERC board approval

Others have processes within the Province for approval


ERO Overview – Reliability is International

Reliability Standards

Compliance Monitoring & Enforcement


Key Documents and Players

Energy Policy Act of 2005 Established the legal framework with FERC as lead agency

Modified Section 215 of the Federal Power Act

Federal Power Act Establishes the Rules for FERC

Title 18, Code of Federal Regulations Part 39 - FERC rules for an ERO

Part 40 – Mandatory Reliability Standards

NERC’s Rules of Procedure FERC Approved and in the Federal Register


NERC as the ERO

NERC Applied to be the ERO on April 4, 2006 Rules of Procedure

Standards Development Process

Compliance Monitoring and Enforcement Program

Sanction Guidelines

Reliability Standards – Version 0 were also filed

Approved NERC as ERO Conditionally on July 20, 2006

Reliability Standards Initially Approved March 16, 2007 – Order 693 – Ultimately Became Effective June 18, 2007 CIP Standards Approved in Order 706 on January 18, 2008

Revisions to the Rules of Procedure and Reliability Standards Continue


Simplified Comparison of US and Columbian Functional Structure

The Federal Energy Regulatory Commission

Executive Branch of Government

RTOs/ISOs

Ministerio de Minas y Energía

Comisión de regulación de Energía y gas Writes the rules

Interprets the rules and develops standards

Implements the rules based on Reliability Regulations and

System operator

US Columbia Government

Unidad de Planeación Minero Energética

Planning Coordinators Transmission Planners Planning

Asset owner Utilities ISA and other entities

Asset Operator Utilities and ISO’s ISA and other entities


Reliability Standards – Foundation to Reliability

Standards are established in logical groupings - a closer examination - at the 30,000 foot level

Balancing Resources and Demand – BAL Purpose - maintain Interconnection frequency within defined

limits by balancing real power demand and supply in real-time and during resource losses.

Includes requirements for operating and regulating reserves and for restoring frequency and reserves after the loss of major units.

Communications – COM Purpose is to ensure adequate and reliable telecommunications

facilities and use of those facilities internally and with others for the exchange of Interconnection and operating information necessary to maintain reliability.


Critical Infrastructure Protection – CIP Purpose is to identify and protect critical assets including critical

cyber assets

Emergency Preparedness and Operations – EOP Addresses the following areas

Emergency operating plans

Capacity and Energy Emergencies

Load shedding plans

Restoration plans

Disturbance Reporting

Facilities Design, Connections, and Maintenance - FAC Establishes requirements for connection, ratings, operating

limits, for generation and end user facilities as well as maintenance of vegetation

Reliability Standards – Ensuring Reliability



Modeling Data and Analysis - MOD Standard includes

Steady state and dynamic modeling data

Transmission and capacity benefit margins

Modeling methods and updates

Personnel Performance Training and Qualifications – PER Addresses training and operator certification

Protection and Control – PRC Addresses coordination and maintenance of automatic

protection and control systems


Reliability Standards – Ensuring Reliability Transmission Operations – TOP

Decision making authority

Operating information – upon request

Outage coordination

Mitigating operating limit violations

Transmission Planning – TPL Purpose - Establish Transmission system planning performance

requirements within the planning horizon to develop a Bulk Electric System (BES) that will operate reliably over a broad spectrum of System conditions and following a wide range of probable contingencies including transmission and generation loss Planning data collection

N-1 and N-2 criteria

Extreme disturbance planning



Voltage and Reactive – VAR Addresses voltage schedules, automatic voltage regulation

Includes all reactive resources

Interconnection Reliability Operations and Coordination – IRO Establishes authorities and procedures for coordinated

operation of transmission systems and generation

Interchange Scheduling and Coordination – INT Establishes reliability rules (not financial) for scheduling of

interchange transactions

Nuclear – NUC Addresses coordination for off-site power between transmission

and plant operators


Integrated Planning – Transmission & Generation Transmission System Network stability is required by the NERC Reliability Standards (TPL-001 through TPL-

003)

Transmission Operators must plan their system to not allow instability, voltage collapse, or cascading under a series of annual tests for the near-term (1-5 years) and longer-term (6-10 years) to ensure: The network can be operated to supply projected customer demands and projected Firm (non-

recallable reserved) Transmission Services at all Demand levels over the range of forecast system demands With all transmission facilities in service (TPL-001)

Under single contingency conditions (TPL-002)

Under multiple contingency conditions allowing for the controlled interruption of load, planned removal of generators, or the curtailment of firm power transfers (TPL-003)

Risks of extreme disturbances evaluated annually – test the system (TPL-004)

Requires coordination with neighboring systems when those systems are affected.

Generation Interconnections Facility Connection Requirements define the rules for interconnecting (FAC-001)

Transmission Operators must establish make their facilities interconnection requirements publically available – generators will know requirements.

Coordination of pans for New Generation, Transmission, and End User-User facilities (FAC-002). To avoid adverse impacts on reliability, Generator Owners and Transmission Owners and

electricity end-users must meet facility connection and performance requirements.


Grid Operations

Interconnected Reliability Operations (IRO standards) Ensures system is evaluated daily and in real time

Defines Roles and Responsibilities Reliability Coordinator has ultimate authority

Balancing Authorities and Transmission Operators

Transmission Operations (TOP standards) Monitoring and operating to prevent instability,

uncontrolled separation, or cascading Outage coordination

Interconnection Reliability Operating Limit violations

Generation Operations (BAL standards) Area Control Error

Control of system frequency

Restoration of regulating and operating reserves


Regulatory Summary

Mandatory Reliability Standards Federal Law in the US – EPAct 2005

Federal Energy Regulatory Commission (FERC) assigned authority in US

$1 Million per day max penalty

Provincial Regulation in Canada per Canadian Constitution Enforcement varies by Province

NERC is the Electric Reliability Organization Certified by FERC in the US

Generally recognized by Provincial Authorities in Canada

Sets and Enforces the Reliability Standards

Rules exist for the planning of the system and the coordination of those plans.


Who Must Comply With The Standards

Energy Policy Act: All owners, operators, and users of

the bulk power system shall comply with reliability standards

18 CFR Part 39 (FERC’s Implementing Rule for the ERO) requires registration with the ERO

Each user, owner and operator of the Bulk-Power System within the United States (other than Alaska and Hawaii) shall register with the Electric Reliability Organization and the Regional Entity for each region within which it uses, owns or operates Bulk-Power System facilities, in such manner as prescribed in the Rules of the Electric Reliability Organization and each applicable Regional Entity.


What Standards Apply?

Each Reliability Standard contains an “Applicability Section” Identifies the functional entities responsible

Joint Registration – Can assign responsibility

Coordinated Functional Registration – Splits the requirements for a function between entities

A requirement can be “not applicable” Example – No Underfrequency relaying


NERC Functional Model


Users, Owners Operators

Users, Owners, and Operators of the Bulk Power System Required to register with ERO May dispute registration if involuntary

Registration Criteria (Statement of Compliance Registry Criteria) Bulk Power System – 100 kV and above

25 MW Load Serving Entity or Distribution Provider – 100 kV and above

20 MVA Generator connected at 100 kV and up

75 MVA Generating Plant connected at 100 kV and up

Other facilities that are determined as material to BPS reliability

Allows for exclusions – regional based

Approximately 1900 entities currently registered


Transmission System Planning

Planning Coordinator/Authority A single entity must coordinate these actions to ensure a least cost

outcome that maintains or improves existing reliability levels

Has the ultimate responsibility for transmission planning and expansion within its region including generation additions RTO/ISOs perform this function where they exist

RTOs provide efficient, reliable and non-discriminatory service and coordinate such efforts with the appropriate state authorities.

In other areas this is generally conducted by a regional entity

In the absence of a single entity performing these functions, there is a danger that separate transmission investments will work at cross-purposes and possibly even hurt reliability.

Transmission Planner & Resource Planner Perform local planning that must “roll-up” into the broader plans


Balancing Authority Areas


Functional Responsibility of Various US and Canadian RTOs/ISOs & Utilities

Entity Name Region Country BA DP GO GOP IC LSE PC PSE RC RP TO TOP TP TSP

ERCOT - RTO ERCOT United States BA IC PC RC RP TOP TSP

HQ TransEnergie NPCC Canada BA IC PC RC TO TOP TP TSP

ISO-NE - RTO NPCC United States BA IC PC RC RP TOP TP TSP

MISO – RTO MRO United States BA IC PC RC TSP

NYISO- RTO NPCC United States BA IC PC RC RP TOP TP TSP

NSP - RTO NPCC Canada BA DP GO GOP IC PC RP TO TOP TP TSP

PJM - RTO RFC United States BA IC PC RC RP TOP TP TSP

XM Colombia X X X X X

Electric Reliability Council of Texas, Inc. (ERCOT) – RTO Hydro-Quebec (HQ) TransEnergie ISO-New England (ISO-NE) - RTO Midwest Independent Transmission System Operator, Inc. (MISO) – RTO New York Independent System Operator (NYISO) - RTO Nova Scotia Power Inc. (NSP) – RTO PJM Interconnection, LLC (PJM) – RTO

BA – Balancing Authority: The functional entity that integrates resource plans ahead of time, maintains generation/load-interchange-balance within a Balancing Authority Area, and contributes to Interconnection frequency in real time.

IC – Interconnection Coordinator: The Interchange Coordinator collects approvals or denials for Arranged Interchange from Balancing Authorities and Transmission Service Providers and verifies the validity of the source and sink.

RC – Reliability Coordinator: The functional entity that maintains the Real-time operating reliability of the Bulk Electric System within a Reliability Coordinator Area.

TOP – Transmission Operator: The functional entity that ensures the Real-time operating reliability of the transmission assets within a Transmission Operator Area.

TSP – Transmission Service Provider: The functional entity that administers the transmission tariff and provides Transmission Service to Transmission Customers under applicable transmission service agreements.


Colombia – North America Comparison Colombia has entities with differing responsibilities

XM is performs long-term operational planning

UPME performs long-term system planning and proposed system improvements

Planning is a continuum What is planned in the long-term must ultimately be able to be

operated reliably in real-time

North America has many entities with different business models North American Approach is to define the roles and the coordination

through the standards Transmission Planning Standards – no instability, uncontrolled

separation, or cascading while serving loads through n-2 conditions (with limited load shedding)

Generator Interconnection Requirements – established in advance

Coordination of plans required at all levels – generator interconnection and transmission planning with Planning Coordinator having ultimate authority


Wrap-Up Regulation usually follows events

Cycle is – Regulation, relaxing the rules, event, new regulation

Compliance with the standards is federal law

FERC has the authority in the US to enforce reliability standards – Canada through Provincial Regulators Accomplishes through ONE ERO

Bulk Power System Users, Owners, and Operators are required to register with the ERO

FERC approves all US penalties – may choose a different one

Standards are changing More detail – less flexibility


Questions


David W. Hilt, P.E. Vice President of Transmission Quanta Technology 4020 Westchase Boulevard, Suite 300 Raleigh, North Carolina, USA 27607 Office - 919-334-3037 Cell - 618-751-4559 E-fax - 610-757-1723 www.Quanta-Technology.com

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